Borrowed Funds

12 Months Ended

Dec. 31, 2021

Debt Disclosure [Abstract]

Borrowed Funds

BORROWED FUNDS (Note 10)

Short-Term Borrowings

Short-term borrowings at December 31, 2021 and 2020 consisted of the following: 

	2021		2020
FHLB advances	$	500,000	$	1,000,000
Securities sold under agreements to repurchase	155,726		147,958
Total short-term borrowings	$	655,726	$	1,147,958

The weighted average interest rate for short-term FHLB advances was 0.37 percent and 0.38 percent at December 31, 2021 and 2020, respectively. The interest payments on the FHLB advances totaling $500 million were hedged with interest rate swaps at December 31, 2021. See Note 15 for additional details.

Long-Term Borrowings

Long-term borrowings at December 31, 2021 and 2020 consisted of the following: 

	2021		2020
FHLB advances, net (1)	$	789,033	$	1,592,252
Subordinated debt, net (2)	634,643		403,413
Securities sold under agreements to repurchase	—		300,000
Total long-term borrowings	$	1,423,676	$	2,295,665

(1)	FHLB advances are presented net of unamortized premiums totaling $1.0 million at December 31, 2021 and prepayment penalties, and other purchase accounting adjustments totaling $2.6 million at December 31, 2020.
(2)	Subordinated debt is presented net of unamortized debt issuance costs totaling $5.8 million and $2.7 million at December 31, 2021 and 2020, respectively.

FHLB Advances. Long-term FHLB advances had a weighted average interest rate of 1.88 percent and 2.02 percent at December 31, 2021 and 2020, respectively. FHLB advances are secured by pledges of certain eligible collateral, including but not limited to, U.S. government and agency mortgage-backed securities and a blanket assignment of qualifying first lien mortgage loans, consisting of both residential mortgage and commercial real estate loans.

In June 2021, Valley prepaid $247.5 million of long-term FHLB advances with maturities scheduled through 2025 and a weighted average effective interest rate of 1.82 percent. In December 2020, Valley prepaid $534.3 million of long-term FHLB advances scheduled to mature in 2021 and 2022 with a weighted average effective interest rate of 2.48 percent. The June 2021 and December 2020 transactions were funded with excess cash liquidity and accounted for as an early debt extinguishment resulting in losses of $8.4 million and $9.7 million reported within non-interest expense for the years ended December 31, 2021 and 2020, respectively.

Long-Term Borrowings

The long-term FHLB advances at December 31, 2021 are scheduled for contractual balance repayments as follows: 

Year	Amount
	(in thousands)
2023	$	350,000
2024	165,000
2025	273,000
Total long-term FHLB advances	$	788,000

There are no FHLB advances with scheduled repayments in years 2023 and thereafter, reported in the table above, which are callable for early redemption by the FHLB during 2022.

Subordinated Debt. On April 1, 2021, Valley redeemed, at par value, $60 million of its callable 6.25 percent subordinated notes originally due April 1, 2026. No gain or loss was incurred on this transaction.

At December 31, 2021, Valley had the following subordinated debt outstanding by its maturity date:

•$125 million of 5.125 percent subordinated notes issued in September 2013 and due September 27, 2023 with no call dates or prepayments allowed, unless certain conditions exist. Interest on the subordinated debentures is payable semi-annually in arrears on March 27 and September 27 of each year. In conjunction with the issuance, Valley entered into an interest rate swap transaction used to hedge the change in the fair value of the subordinated notes. In August 2016, the fair value interest rate swap with a notional amount of $125 million was terminated resulting in an adjusted fixed annual interest rate of 3.32 percent on the subordinated notes, after amortization of the derivative valuation adjustment recorded at the termination date. The subordinated notes had a net carrying value of $125.2 million and $130.5 million at December 31, 2021 and 2020, respectively.

•$100 million of 4.55 percent subordinated debentures (notes) issued in June 2015 and due June 30, 2025 with no call dates or prepayments allowed unless certain conditions exist. Interest on the subordinated notes is payable semi-annually in arrears on June 30 and December 30 of each year. The subordinated notes had a net carrying value of $99.6 million and $99.5 million at December 31, 2021 and 2020, respectively.

•$115 million of 5.25 percent Fixed-to-Floating Rate subordinated notes issued in June 2020 and due June 15, 2030 callable in whole or in part on or after June 15, 2025 or upon the occurrence of certain events. Interest on the subordinated notes during the initial five-year term through June 15, 2025 is payable semi-annually on June 15 and December 15. Thereafter, interest is expected to be set based on Three-Month Term Secured Overnight Financing Rate (SOFR) plus 514 basis points and paid quarterly through maturity of the notes. The subordinated notes had a net carrying value of $113.4 million and $113.3 million at December 31, 2021 and 2020, respectively.

•$300 million of 3.00 percent Fixed-to-Floating Rate subordinated notes issued in May 2021 and due June 15, 2031. The subordinated notes are callable in whole or in part on or after June 15, 2026 or upon the occurrence of certain events. Interest on the subordinated notes during the initial five year term through June 15, 2026 is payable semi-annually on June 15 and December 15. Thereafter, interest is expected to be set based on three-month SOFR plus 236 basis points and paid quarterly through maturity of the notes. At December 31, 2021, the subordinated notes had a carrying value of $296.4 million, net of unamortized debt issuance costs. During June 2021, Valley entered into an interest rate swap transaction used to hedge the change in the fair value of the $300 million in subordinated notes. See Note 15 for additional details.

Long-term securities sold under agreements to repurchase (repos). The long-term institutional repos had a weighted average interest rate of 3.37 percent at December 31, 2020. Long-term repos outstanding as of December 31, 2020 were repaid upon their respective contractual maturity dates during the third quarter 2021.

In September 2020, Valley prepaid $50 million of long-term institutional repo borrowings with an interest rate of 3.70 percent and an original contractual maturity date in January 2022. The debt prepayment was funded by excess cash liquidity. The transaction was accounted for as an early debt extinguishment resulting in a loss of $2.4 million for the year ended December 31, 2020.

Pledged Securities. The fair value of securities pledged to secure public deposits, repurchase agreements, lines of credit, FHLB advances and for other purposes required by law approximated $1.7 billion and $2.1 billion for December 31, 2021 and 2020, respectively.